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Facts
The Assessing Officer observed cash outflows of Rs. 4,00,000/- and made additions of Rs. 3,00,000/- for stock purchases and Rs. 1,00,000/- for unexplained investment under section 69A of the Income Tax Act, 1961. The assessee claimed the Rs. 5,00,000/- was received on 18.09.2014, with Rs. 3,00,000/- used for stock purchase and the rest as cash in hand.
Held
The Tribunal held that the receipt of Rs. 5,00,000/- and the utilization of Rs. 3,00,000/- for stock purchase were substantiated by the cash flow statement and bank statement, directing deletion of this addition. For the remaining Rs. 1,00,000/-, the explanation of agricultural income and past savings lacked concrete documentary evidence.
Key Issues
Whether the additions made by the AO for unexplained investment and stock purchases are justified based on the evidence provided by the assessee?
Sections Cited
69A, 69
AI-generated summary — verify with the full judgment below
Assessment Year : 2015-16 Anshuman Sharma Vs. The ITO S/o Shri Radhe Shyam Sharma, Ward-1(4) C-79, Sadul Ganj, Bikaner Bikaner PAN NO: AXRPS5752M Appellant Respondent Assessee by : Shri Shafi Mohd. Chouhan, Advocate Revenue by : Smt. Anuradha, Addl. CIT DR Date of Hearing : 30/07/2025 Date of Pronouncement : 18/08/2025 आदेश/Order PER LALIET KUMAR, J.M: This appeal has been preferred by the assessee against the order dated 05/06/2024 passed by the Ld. CIT, Appeal Addl/JCIT(A)-13, Mumbai for the Assessment Year 2015-16.
In the present appeal Assessee has raised the following grounds:
(i) That the order passed is illegal and against the law. (ii) That the Ld. Assessing Officer is erred in making the addition of Rs. 4,00,000/- under section 69A on account of unexplained source of investment, without providing any specific opportunity to explain. (iii) That the Ld. CIT(A) is erred in passing the order as such the same is passed without appreciating the evidences and submission submitted by the assessee.
3. The facts in brief, as emanating from the record, are that during the course of assessment proceedings, the Ld. AO observed certain cash outflows aggregating to Rs.4,00,000/- in the name of the assessee. The assessee was called upon to explain the nature and source of the said cash outflows. Being dissatisfied with the explanation furnished, the Ld. AO proceeded to make an addition of Rs.3,00,000/- towards alleged stock purchases and Rs.1,00,000/- towards unexplained cash investment, treating the same as unexplained investments under section 69 of the Income Tax Act, 1961.
4. Aggrieved by the order so passed, the assessee carried the matter in appeal before the Ld. CIT(A). In the appellate proceedings, the assessee reiterated the submissions made before the Assessing Officer and placed on record supporting documents in the form of a cash flow statement, stock movement registers, and cash book extracts. However, the Ld. CIT(A) was not inclined to accept the assessee’s explanation and upheld the additions made by the Ld. AO. No relief was granted. Being further aggrieved, the assessee is now in appeal before us.
5. The AR appearing on behalf of the assessee submitted that a sum of Rs.5,00,000/- was received by the assessee on 18.09.2014 and the said receipt was duly reflected in the cash flow statement maintained. It was submitted that out of the said amount, Rs.3,00,000/- was utilised towards the purchase of stock and the remaining was retained as cash in hand. 5.1 As regards the addition of Rs.1,00,000/-, it was contended that the investment was sourced from past savings and agricultural income. It was explained that, due to the rural background of the assessee and the informal nature of farming transactions, no formal documents, such as sale bills or revenue records, were preserved. Nevertheless, it was argued that the explanation should be accepted in the context of the overall facts and circumstances. In support of the claim, the Ld. AR placed reliance on the cash book extracts, inventory movement charts. They claimed that the assessee was engaged in agricultural activity in his ancestral village, from which reserves had been built over time.
6. Per contra, the learned Departmental Representative (DR) strongly supported the orders of the Assessing Officer and the learned CIT(A). It was argued that no credible or verifiable evidence had been brought on record by the assessee to establish the receipt of Rs.5,00,000/- or to prove the actual utilisation of Rs.3,00,000/- towards stock purchase. The DR further submitted that the claim of agricultural income was unsubstantiated and unsupported by documentary evidence, such as landholding records, details of agricultural produce, or past income declarations. In such circumstances, it was argued that the lower authorities rightly sustained the impugned additions.
We have heard the rival submissions and perused the material placed on record. The factum of receipt of Rs.5,00,000/- on 18.09.2014, as reflected in the cash flow statement, stands substantiated and has not been controverted. The explanation of the assessee that Rs.3,00,000/- was utilised towards the purchase of stock is corroborated by the bank statement placed at page 18 of the paper book. The Assessing Officer has brought no contrary material on record to disbelieve this explanation. In our considered view, the explanation furnished by the assessee appears reasonable and is supported by circumstantial evidence. Hence, the addition of Rs.3,00,000/- made on this account is directed to be deleted. 7.1 As regards the addition of Rs.1,00,000/-, the assessee’s explanation rests on agricultural income and past savings. However, no concrete documentary evidence, such as land records, khasra-girdawari, or previous declarations of agrarian income, has been placed on record. While we do not entirely rule out the possibility of the assessee having accumulated some funds from rural and informal sources, in the absence of verifiable supporting documents, the entire explanation cannot be accepted at face value. In the interests of justice and fair estimation, we deem it appropriate to sustain the addition to the extent of Rs.50,000/- and delete the balance of Rs.50,000/-.
7.2 In view of the foregoing discussion, the appeal of the assessee is partly allowed. The addition of Rs.3,00,000/- is deleted. Out of the addition of Rs.1,00,000/-, an amount of Rs.50,000/- is sustained, and the remaining Rs.50,000/- is deleted. 8. In the result, appeal of the Assessee is partly allowed.
(Order pronounced in the open Court on 18/08/2025 )